Business leaders brief Habibie on economic crisis
Business leaders brief Habibie on economic crisis
JAKARTA (JP): Business leaders briefed President B.J. Habibie
yesterday on the critical condition of the economy and called for
more concerted efforts to revive the banking industry, the source
of lifeblood for economic activity.
The government needs to act quickly and firmly to lead the
banking industry out of its virtual paralysis, Aburizal Bakrie,
chairman of the Indonesian Chamber of Commerce and Industry
(Kadin) told reporters after a meeting with Habibie at Bina Graha
presidential office.
"The Indonesian Bank Restructuring Agency (IBRA) should be
further empowered to strengthen the problem banks currently under
its supervision and management," Aburizal added.
Aburizal led a large delegation of Kadin executives to a first
meeting with the President to appraise him of the dire economic
situation and to suggest ways of resolving the crisis.
The Central Bureau of Statistics reported Monday that the
country's gross domestic product contracted 8.51 percent in the
first quarter and projected a total negative growth of more than
10 percent for the year.
Kadin suggested that the government select a number of private
and state banks, based on a set of criteria, to be quickly
developed into anchor banks which would be fully trusted
domestically and internationally.
"These anchor banks could eventually be merged with the (54)
problem banks currently being restructured by IBRA," Aburizal
added.
Most Indonesian banks now face extreme financial difficulties
as a result of the 80 percent depreciation of the rupiah against
the American dollar.
High interest rates, a severe lack of liquidity and low
capital levels and huge bad loans are further crippling most
banks and consequently the corporate sector.
Analysts say most banks currently cannot extend loans and are
desperate to collect on outstanding loans so they can satisfy
depositor and creditor payment demands.
The central bank said that as of late last month it had pumped
more than Rp 124 trillion (US$12.4 billion) in liquidity credits
to banks facing severe liquidity problems.
Interest rate
Kadin suggested yesterday that the central bank lower its
benchmark interest rate from its current 58 percent level because
businesses could not handle such punitively high capital costs.
The chamber said the government and businesspeople,
irrespective of company size or ethnic group, should join hands
in restoring production and distribution facilities.
A large number of business establishments, including shops,
shopping malls and bank offices in Jakarta, its surrounding areas
and several provincial cities, were severely damaged from looting
and arson last month.
Most of the damages were inflicted upon the businesses of
ethnic Chinese businesspeople.
Aburizal added that Kadin supported the President's plan to
appoint special envoys with an ambassadorial rank from the
private sector with the specific task of restoring international
confidence in Indonesia's economic prospects and business sector.
(vin)